Ray Dolby builds empire of sound

Matt Beer, EXAMINER TECHNOLOGY WRITER

Published 4:00 am, Sunday, May 16, 1999

Ray Dolby, the 66-year-old founder of the famed Dolby noise reduction system that made cassettes a viable music medium, patiently reels in an errant strip of recording tape that has come loose during a lunchtime interview.

"There," he said in his monotone, setting the fixed pocket recorder back down on a restaurant table. "That should take care of it."

Glance at most stereo systems, VCRs or movie listings, and chances are you'll see Dolby's last name and opposing double "D' trademark. The brand has been stamped on an estimated 750 million electronic products since Ray Dolby began his company in London in 1965.

Dolby Laboratories Inc., now headquartered in an expansive Potrero Hill loft, was started in London in 1965 to market Dolby's seminal invention - anti-noise recording technology.

Dolby thought up the technology while doing some calculations one night in 1964 in India, where he was working as a United Nations advisor on scientific instruments, following six years in a Ph.D. physics program at Cambridge.

Until then, music recordings contained a considerable amount of background hiss when played back. Dolby's invention filtered out the hiss while leaving the music signal untouched. The technology made cassettes a mass market medium.

Related Stories

On Thursday, the Dolby brand will also be linked to another mass market phenomenon: Dolby Laboratories will debut a cutting-edge, in-theater sound technology for the much-anticipated Star Wars prequel "Star Wars: Episode I - The Phantom Menace."

Thanks to the Dolby labs, the sound of George Lucas' star ships, light sabers and futuristic Tatooine pod racing vehicles will careen over moviegoers' heads, thanks to a separate back channel of sound.

Currently, most theaters have six separate sound channels: center, front (left and right), side surround (left and right), and sub woofer. The new theater sound, dubbed Dolby Digital Surround EX, will have an additional set of rear speakers pumping out their own discreet sound effects.

Star Wars creator George Lucas requested the technology in order to immerse the audience in the on-screen action.

It'll be the second time Dolby and Star Wars have made a co-debut. The 1977 "Star Wars" movie was the first special effects extravaganza to use the original Dolby Surround Sound theater system, which allowed directors to send different effects to different parts of the theater.

Dolby's Brisbane factory has been working overtime to kick out the company's $2,500 EX decoder boxes requested by some 2,000 theaters that want the sound system for the

"Phantom" debut.

"Dolby is a quality, sophisticated technology that allows us to sound good," said Monica Dashwood, general manager of the THX division of Lucasfilm Ltd. THX is a Lucas-created sound standard that works much like a Good Housekeeping seal of approval.

Lucas began the division after hearing "Return of the Jedi" audio special effects being muddied in theaters around the country. Dolby and THX together developed the Dolby Digital Surround EX used in "Phantom Menace."

"The sound is much more realistic," Dashwood said of the

"Phantom" EX experience. "It more accurately portrays things the way they are in real life with sound coming from behind your and over you."

A demonstration of Dolby EX in the acoustically tuned private theater inside Dolby Laboratories on Potrero Street bears Dashwood out. The sound from a "Phantom Menace" preview can only be described as the audio version of 3-D.

Spaceship laser wars surge around the ceiling. A desert race with high-powered jet cars sounds as if you're sitting in the driver's seat.

While the marathon hoopla surrounding the next Star Wars saga will reach its zenith Thursday, Dolby himself will be absent from the theaters.

On that day, Dolby will be starting his 41-stop trip across North America, Europe and Africa, piloting his own eight-seat Palatus PC-12 turboprop airplane.

"Oh, I can see Star Wars some other time, though, I guess if you're 13 years old, it must be a very important event," he said.

The response mirrors Dolby's business credo: Avoid the hoopla and focus on what you do best. It's a principal that has kept Dolby Laboratories a market leader in an increasingly competitive home and theater sound technology market.

"Dolby is simply the most widely used sound experience, both for home users and theater goers," said Amy Hill, a spokesman for the Arlington, Va.-based Consumer Electronics Manufacturers Association. "When you talk about home audio or the growing home theater experience, you have to talk about Dolby. They have become and will probably stay the standard in these areas."

Dolby Laboratories may be a standard, but it is also a high-tech business anomaly.

While tech companies, especially the newer Internet-based start-ups, have lived and died on investor money by way of the stock exchanges, Dolby Laboratories has stayed out of the stock markets, remaining a private company overseen by its founder.

"When I started, I wanted to have a small company that I could comprehend and enjoy," said Dolby. "It was sort of my own personal project, you might say."

"Being a private company has helped us immensely," said Dolby President Bill Jasper. "We don't have to worry about quarterly earnings or having analysts second-guess us all the time."

Jasper added that the lack of market pressures allows the company to polish its technology before putting it out on the market.

"Being private means we avoid Wall Street's need to have us keep putting things on the market," he said.

"We worked on that for years before we decided it was right to release."

Dolby's "personal project," which now generates $100 million in annual revenues and employs 500, has stayed private by dint of a unique business model: Dolby Laboratories has never built its own line of consumer products. Instead, it manufactures Dolby encoding devices for recording studios and movie producers and then licenses the technology that plays the Dolby process to manufacturers of consumer electronics.

It's a business plan that lets Dolby Laboratories avoid having to find investors to fund large manufacturing plants and supporting infrastructure. It also has made the company an important ally to the consumer electronics market, instead of a competitor.

"We've been urged over the years to make our own tape decks, amplifiers and the like," said Jasper. "But Ray, rightly so I think, has kept with the idea that we should be a catalyst for the industry, not a competitor. It lets us concentrate on what we do best."

But it's a model that comes at a cost, its founder said.

"I've probably missed some opportunities by keeping things the way they are," said Dolby. "I could have sold (the company) or taken it public."

Dolby frowns when thinking of the prospect of putting his company on the stock market.

"Immediately things would begin happen all around the company's fringes," he said. "You can't keep track of 'em. That's what happens when you take a company public, with all the intense pressure for earnings."

It's a trap that Dolby said he's seen fellow company execs fall into.

"Some people say you're missing a good thing," said Dolby. "Others say, "God, you're so lucky. . . . You can have your cake and eat it, too. You don't have to put with shareholders and the like.' "

Dolby, who said he's semi-retired, goes into the Potrero Hill offices twice a week, attending management meetings and briefings on the latest Dolby Laboratories creations, including a surround sound headphone standard and Dolby stereo technology for home computer gaming.

Dolby's status at the company makes for a unique, free-flow, internal management structure.

"We don't have a CEO," said Jasper, "except when Ray is in the building. Then he is the designated CEO until he walks out the door."

When he's not in the office, Dolby spends his time on flying (he's a commercially rated pilot) and pursuing his fascination with motorcycles, antique cars and sailboats.

"I'm fascinated with the technology of transportation," he said.

Dolby said he plans to concentrate on traveling, a first love for him and his wife, Dagmar, who is active in city charity fund raisers. The pair drove a VW bug from India to London to set up the original Dolby company.

"It's a wonderful feeling to get an organization like Dolby Laboratories going and see it run under its own steam," said Dolby. "Now I can step back, more and more, and enjoy the rest of my life, doing what I want to do."

Which may, eventually, include a trip to see "Phantom Menace" and his namesake Dolby Digital Surround EX.

Now Playing:

"The first time I saw "Star Wars,' I thought it was a spoof," Dolby said. "But I don't think I'll make that mistake again."

Then he chuckled. "People take their fantasy pretty seriously these days," he said.&lt;

Latest from the SFGATE homepage:

Click below for the top news from around the Bay Area and beyond. Sign up for our newsletters to be the first to learn about breaking news and more. Go to 'Sign In' and 'Manage Profile' at the top of the page.